How to Fund an LLC

Most people that start businesses with numerous partners understand the disadvantage of going the corporation route; and with partnerships rarely accurately reflecting the type of agreement among a group of individuals intent upon starting a business, limited liability companies are often the most viable option.

The process of starting an LLC is relatively hassle-free, so long as you have a business name that is unique enough to be protected by copyright. You need only prepare and sign an LLC Operating agreement, craft the business’ LLC articles and submit them to the relevant authorities, and acquire the necessary licenses and permits to begin operations.

Funding an LLC

The amount of capital any given LLC requires to start will depend on the industry in question. You can estimate the figure by determining the cost of developing and producing your product.

The structure of limited liability companies is such that financial institutions are often hesitant to avail loans to them, especially if the creditworthiness of their members is in question.

Venture capitalists also tend to give LLCs a wide berth for similar reason, some of those most common sources of funding for limited liability companies including the following:

Personal Resources

A number of LLCs depend upon the personal assets of their members to fund their operations. Any entrepreneur seeking to start an LLC should first take into account the combined financial strength of his partners, determining the amount of money each member can afford to give up from their personal savings.

Funding in such situations doesn’t always have to be cash. Property and services can prove just as useful to an LLC’s efforts.

Loans

Personal loans are a fairly popular source of funding for LLCs. The creditworthiness of each member is an important factor here, with each member of an LLC personally liable for repaying the loan.

SBA Assistance

Limited liability companies have been known to apply for financial help from the United States Small Business Administration. Individuals and entities applying to this agency must present their business plan and other related documents that show the other sources of funding that were pursued before SBA assistance was sought.

Companies whose applications are approved can expect to receive SBA backing when applying for loans.

Venture capitalists are a credible source for funding an LLC; however, because venture capitalists rarely risk their money in situations that cannot guarantee a profit, few LLC’s can hope to utilize successfully this funding option, not unless they can show profitability before seeking funds from an investor.